Kenya’s Ruto signs contentious tax bill into law

Kenyan President William Ruto on Monday signed into law a bill that raises taxes on a wide range of items, the presidency said, defying criticism that it will pile more economic hardship on citizens.

The new tax package was approved by parliament last week and will double tax on fuel to 16 percent and introduce a new housing levy, a move expected to have a ripple effect in a country hamstrung by high inflation.

“President Ruto has assented to the finance bill. Signed at State House,” the presidency said in a message to journalists, accompanied by pictures of him signing the document.

Ruto, who took office in September after a bitterly fought election, is seeking to fill the government’s depleted coffers and repair a heavily-indebted economy inherited from his predecessor Uhuru Kenyatta, who splurged on major infrastructure projects.

Kenya is now sitting on a public debt mountain of almost $70 billion or about 67 percent of gross domestic product (GDP), and repayment costs have jumped as the shilling sinks to record lows of around 140 to the dollar.

The new law — expected to generate more than $2.1 billion — will hike taxes on basic goods and services including food and mobile money transfers.

People who earn 500,000 shillings ($3,600) a month will now pay 32.5 percent in income taxes while those making 800,000 shillings ($5,700) will pay 35 percent, up from the current 30 percent.

Sales tax for small businesses has also been tripled to three percent.

One of the most contentious provisions is a 1.5 percent levy on the salaries of all tax-paying Kenyans that will be matched by employers to fund an affordable housing programme.

A new five percent withholding tax for digital content creators has also been introduced.

‘Mistake and an experiment’

The opposition led by Ruto’s rival Raila Odinga has threatened fresh demonstrations over the tax package, saying it will strain already squeezed incomes.

“Our position remains that the bill is a mistake and an experiment Kenyans can ill afford,” Odinga’s spokesman Dennis Onyango told AFP on Monday.

“We had hoped that Ruto could call for its review before signing it,” he said, adding that Odinga’s Azimio alliance will announce its next step at a rally on Tuesday.

Earlier this year, the opposition staged several anti-government protests over the cost of living crisis which degenerated sometimes into deadly street clashes between police and demonstrators.

At least a dozen protesters were also arrested this month during a march against the tax proposals.

Critics accuse Ruto of rowing back on promises made during the August 2022 election campaign, when he declared himself the champion of impoverished Kenyans and pledged to improve their economic fortunes.

But the 56-year-old rags-to-riches businessman has defended the taxes, saying the housing fund will construct homes for the poor and create employment.

Kenyans are already feeling the pinch from soaring prices for basic necessities, along with a sharp drop in the value of the local currency.

Economic growth slowed last year to 4.8 percent from 7.6 percent in 2021, reflecting the global fallout from Russia’s invasion of Ukraine and the worst drought in four decades buffeting the vital agriculture sector.

The Law Society of Kenya has vowed to challenge the finance law in court this week.